October 29, 2013

Two Critical Questions About Carbon Budgets

It's not a pretty picture. The IPCC is brutally honest about where it can't provide certainty, such as the exact extent of specific kinds of extreme weather in the future. But the report expresses "near certainty" that humans are causing climate change – that's science-speak for "we know this" – and that we're heading for devastating consequences.

The IPCC provides some guidance on what we need to do, broadly speaking. The key idea is the carbon budget (which Climate Centralrecently summarised nicely). In short, we humans can "safely" put only so much carbon into the environment and maintain decent odds of holding warming to 2 degrees. I credit activist Bill McKibben for making this idea mainstream by writing a powerful piece in Rolling Stone last year.

The latest budget numbers this month are not good news. Here's the crucial paragraph with data on how many gigatons of carbon (GtC) we have left:

"Limiting the warming caused by anthropogenic CO2 emissions alone with a probability of >33%, >50%, and >66% to less than 2°C… will require cumulative CO2 emissions from all anthropogenic sources to stay [below] 1,560 GtC, 1,210 GtC, and 1,000 GtC [respectively]. An amount of 531 GtC was already emitted by 2011."

So to boil this down, if we want a 66% probability, we have about 469 GtC left. And the budget is even smaller if you also consider what IPCC calls "non-CO2 forcings" which Michael Mann – he of The Hockey Stickfame – described to me as "other human-produced greenhouse gases, including methane from agriculture/livestock and potentially now from leaks during [gas] fracking."

McKinsey and PwC have both taken previous IPCC estimates and translated them into annual targets. Basically, we need to improve our carbon intensity – the carbon we emit per dollar of GDP – by about 5% per year. These new IPCC numbers imply we have to go even faster.

All these numbers raise many questions, but let me pose two important ones:

1. Why aren't we trying to limit warming with a probability of 90%?

For a two-thirds chance of staying below the 2 degree threshold, we only have 469 GtC left. So how small would the budget be if we wanted a much higher probability? The next paragraph in the IPCC report provides some guidance: "A higher likelihood of remaining below a specific warming target, will require lower cumulative CO2 emissions."

What I suspect – and this is scary – is that there is no realistic number that gets us to a 90% or 95% chance of holding to 2 degrees. Meaning, we've already emitted enough to lock in substantial warming. The report backs up my suspicion by declaring, "a large fraction of anthropogenic climate change resulting from CO2 emissions is reversible on a multi-century to millennial timescale."

So we're rolling the dice here and only have a two-thirds shot, even with aggressive reductions.

2. How should companies think about the carbon budget concept?

We have to break down the global budget into smaller bites. The reasonable starting point is for every organisation to set a goal of moving at the required pace, which means reducing emissions intensity by roughly 5% per year.

Of course it's much more complicated to set equitable targets by sector or company, and it's a fair question to wonder if companies can take this on given their short-term focus. Meaning, why should a company do more on carbon than it can easily justify with regular investment hurdle rates?

It's a very tough issue to reconcile. The short answer is that companies should accept the budget logic because, as many have said, business can't succeed in a world that fails. Climate change threatens society, of which business is a subsidiary.

But the macro logic is hard for companies to act on in a quarter-driven economy. So we need to slash carbon in ways that pay off in traditional terms with one major caveat – we should expand our thinking about what payoff means and include all the business value that we can create from clean economy strategies, value that we don't currently measure well (like reduced risk and brand value).

But will voluntary efforts get us there? Unlikely. We'll need an actual mechanism for driving carbon emissions out of our economy fast enough. And that means government help. So companies are also going to have to get off the sidelines, pivot from the normal "all regulations are bad" attitude, and then actually lobby for carbon pricing and limits.

Logic and survival instinct dictate that we work backwards from the budget scientists give us. Our current path – cutting emissions where we can do it cheaply – is not much better than doing nothing. When 5% a year is the best estimate of what's required, holding carbon emissions flat or cutting a little is nice; but it's like taking one pill in a 10-day course of antibiotics.

It'll seem cheaper and easier at first, but you won't actually solve the problem or feel much better.

Note: This post has been corrected for one error related to carbon budget math -- see following blog.